Listen to “What Does Saving $168 Million Really Mean?” on Spreaker.
Governor Patrick Morrisey told taxpayers Monday that a team of state employees and consultants had identified $168 million in savings for the state. That sounds like a large number. But the announcement lacked context and certainty.
A few points:
• The idea of continuous improvement — exactly what it sounds like — is not something traditionally associated with government. It should be. The exercise itself has the potential to create a cultural shift that could pay dividends over time. That’s a plus. The effort demonstrates an understanding of how precious tax dollars are – a finite commodity.
• The savings estimate is caveated by the word “potential.” That word functions as a safety valve. Missing from Monday’s conversation was any serious cost-benefit analysis explaining what capital investments — body cameras, for instance — would be required to realize those anticipated savings. What does the breakeven analysis look like? The official audit reports characterize the “Estimated Level of Investment Required to Correct” for each cost savings provision as high, medium or low. It’s hard to know what that means without real costs.
A dollar today is worth more than a dollar tomorrow. If the state could instead invest those funds in even a basic high-yield savings account — roughly 3.25 to 4 percent in today’s retail market — then any proposed return from these plans net of execution cost should at least clear that bar at a minimum. Does it? Unknown.
No businessperson, no savvy consumer, no stockholder would make a decision without those necessary and complete details. Why should state government expect taxpayers to accept broad claims without transparent numbers to support them? Perhaps the analysis exists somewhere in a report. But if so, why not make the case directly during the press conference?
More detail is not a vice, it’s a requirement to earn support for a position.
• The $168 million figure amounts to a little less than three percent of the state’s general revenue budget and roughly one percent of the overall state budget once federal dollars are included.
You often hear economists and financial analysts talk about “bending the cost curve.” In plain English, that simply means slowing the rate at which costs grow over time — not just cutting spending once.
Here’s the easiest way to think about it:
Imagine your household expenses. Groceries cost more. Insurance costs more. Utilities cost more. You just spend more discretionally perhaps? Even if you cancel cable one year and save a few hundred dollars, your overall expenses continue climbing.
That one-time savings helps temporarily. But it doesn’t fundamentally change the direction of your spending because the reduction simply isn’t large enough, widespread enough – it isn’t even enough to outpace inflationary pressure.
The median West Virginia household earns roughly $60,000 annually. After taxes, that’s approximately $46,000 to $50,000 in take-home pay — around $3,800 to $4,200 a month.
One percent of that net income — the same percentage $168 million represents in the state’s total budget — equals roughly $460 to $500 a year. About $40 a month. A step in the right direction, but not a massive difference maker.
If a comprehensive efficiency audit of your household produced savings of only one percent, you would probably conclude that most of the obvious efficiencies had already been found, or that you’re unwilling to make the big cuts that would really count.
The same argument can be made for state government. The only difference is the number of zeros involved.
A meaningful structural shift would likely look more like a three percent reduction just to offset baseline inflation, plus another three to four percent in recurring net efficiencies to truly bend the curve. In many respects, that is effectively what state government has already attempted through years of relatively flat budgets – a practice it will have to maintain minus revenue growth.
So, what does it all mean?
This is where it becomes a judgment call.
$168 million can absolutely accomplish meaningful things. If those savings materialize, taxpayers should welcome them. That would be a positive development; only a wash if you simply shift dollars to another cost center. Money moved from one bucket to another is still money spent. Not necessarily bad at all, just fact.
Presenting the number as something transformational — while relying on “potential” savings and without transparent and complete financial analysis explaining how the projections were calculated — naturally raises questions.
Until the numbers become real, and until the supporting math is fully public, the discussion remains more academic than practical. One is theory, one produces real results.
The administration should not be surprised of the skepticism but instead embrace it as the challenge it is to earn the public’s support. If these savings become real and not a “potential,” people will respond appropriately with praise.